“We believe this first sale-leaseback transaction exemplifies our focus
on underwriting both the tenant and the property,” said Robert Sistek,
Chief Financial Officer and Executive Vice President, Investments of the
Company. “PharmaCann possesses a strong management team with solid
financial backing, and is executing well on its business plan in New
York and Illinois, two states which we believe present significant
market opportunities. PharmaCann's New York medical-use cannabis
cultivation and processing facility is built to exacting specifications,
and represents a clear move to institutional quality real estate in this
sector.”

New York is the fourth most populous state in the United States with
nearly 20 million residents as of July 1, 2015, according to the U.S.
Census Bureau.

In July 2014, Governor Andrew Cuomo and the New York state legislature
enacted the Compassionate Care Act, creating the framework for New
York's medical-use cannabis program, which is administered by the New
York Department of Health. In its ongoing review of the program, the
Department of Health has taken significant steps recently to expand
access to medical-use cannabis for patients needing treatment in the
state. Earlier this month, the Department of Health announced that it
plans to add chronic pain to its list of qualifying conditions for
treatment, and to allow licensed medical-use cannabis providers to
wholesale their products to other licensed providers in the state. Last
month, New York-licensed nurse practitioners became eligible to
recommend medical-use cannabis for their patients, and a proposed
rulemaking was published to allow physician's assistants to also make
such recommendations. According to the Department of Health, there are
nearly 19,000 nurse practitioners and more than 11,000 physician
assistants licensed to practice in New York, where they are already
authorized to prescribe controlled substances, such as opioids, for
chronic pain and other debilitating conditions. In addition, the
Department of Health recently enacted rules to allow for home delivery
of medical-use cannabis.

“We see a tremendous need from patients in New York for treatment, and
we are very encouraged by the recent moves by the Department of Health
to expand access to these patients,” said Teddy Scott, Chief Executive
Officer of PharmaCann. “This transaction frees up capital we need for
expansion, and we expect the recently enacted changes in New York and
other changes to the program being considered to have a very meaningful
impact on patient demand for our products.”

The Company acquired PharmaCann’s New York facility for $30 million in
the sale-leaseback transaction. Concurrent with the closing, the Company
and PharmaCann entered into a lease for an initial term of 15 years,
with two five-year lease extension options. The lease provides for an
initial base rent of $319,580 per month, subject to annual increases of
the greater of 4% or 75% of the consumer price index. The lease also
provides for a property management fee payable to the Company equal to
1.5% of the then-current base rent throughout the term, and supplemental
base rent for the first five years of the term at a rate of $105,477 per
month. Together, the annualized initial base rent, property management
fee and supplemental base rent equate to approximately 17.2% of the
purchase price of the New York facility.

In addition to the medical-use cannabis cultivation and processing
facility that is the subject of the Company’s sale-leaseback
transaction, PharmaCann operates two medical-use cannabis cultivation
and processing facilities and four registered medical-use cannabis
dispensaries in Illinois and four registered medical-use cannabis
dispensaries in New York.

About Innovative Industrial Properties

Innovative Industrial Properties, Inc. is a self-advised Maryland
corporation focused on the acquisition, ownership and management of
specialized industrial properties leased to experienced, state-licensed
operators for their regulated medical-use cannabis facilities.
Innovative Industrial Properties intends to elect to be taxed as a real
estate investment trust. Additional information is available at www.innovativeindustrialproperties.com.

Forward-Looking Statements

This press release contains statements that we believe to be
“forward-looking statements” within the meaning of the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. All
statements other than historical facts, including, without limitation,
statements regarding the lease with PharmaCann, the New York medical-use
cannabis market and proposed changes to New York medical-use cannabis
regulations, are forward-looking statements. When used in this press
release, words such as we “expect,” “intend,” “plan,” “estimate,”
“anticipate,” “believe” or “should” or the negative thereof or similar
terminology are generally intended to identify forward-looking
statements. Such forward-looking statements are subject to risks and
uncertainties that could cause actual results to differ materially from
those expressed in, or implied by, such statements. Investors should not
place undue reliance upon forward-looking statements.